AGR-1
Apr 13th, 2009, 08:09 AM
The leasing boom, price cuts, and a flight to quality helped the car maker post its best ever first quarter
GREG KEENAN
From Saturday's Globe and Mail
April 11, 2009 at 8:45 AM EDT
AUTO INDUSTRY REPORTER
Marcus Breitschwerdt has a reason to brag and if he did, the numbers would back him up.
Instead, the president of Mercedes-Benz Canada Inc. describes himself as confident about the company's prospects after its best ever first quarter in Canada - and impressed by how policy makers have positioned the country to weather the global economic crisis.
Buoyed by that strong first quarter - the auto maker's sales jumped 20 per cent, compared with a 22-per-cent decline for the overall market - Mr. Breitschwerdt predicts company's sales will rise this year from 2008 levels, even though the overall Canadian market is expected to have its worst year of the decade.
"These are not good times, but we didn't have good times in Canada in the car business over the past five years," he notes. In that period, Canada has grown to become the 11th largest market for Mercedes-Benz worldwide, up from 17th.
Mercedes-Benz is not alone in bucking the trend. Audi Canada sales, for example, rose 3 per cent, while BMW Canada Inc. and the Lexus division of Toyota Canada Inc. both gained market share with sales that fell only 1 per cent and 7 per cent, respectively.
And in perhaps the ultimate burst of optimism, or a signal that the battered auto market has reached the bottom, Aston Martin will open a $1.2-million dealership in Calgary next week. Luxury brands have tended to outperform those of mass-market companies in past auto slumps.
"What you see in the Canadian market, especially in times in which you have feelings of insecurity or uncertainty, people far more intensively than before check and consider their investment and their spending," Mr. Breitschwerdt says. "That plays a lot into our direction."
In addition, a much higher percentage of luxury buyers lease their vehicles than finance them, which means the dealerships have more customers returning at regular intervals, notes Richard Cooper, vice-president of Canadian operations for consulting firm J.D. Power and Associates.
"I was in a Lexus showroom over the weekend and it was like a zoo," Mr. Cooper says. "I think that's probably driving the market now, too. I think there's a lot of vehicles coming off lease at the moment."
Leasing represented about 46 per cent of the market for luxury sellers during the first quarter of 2009, compared with 16 per cent for mass-market companies, J.D. Power figures show.
In the case of Mercedes, the more than $100-million the company and its dealers have spent this decade rebuilding stores has also helped.
Mr. Cooper says Mercedes-Benz and Subaru Canada Inc. are two companies that have trimmed prices on key new models, which also helps explain why both are bucking the downward trend.
"Mercedes has been very aggressive ... on lease and finance rates over the last year or so," he notes.
A continuing infusion of new vehicles better than the ones they replace, or that help auto makers compete in new segments, is critical.
Mr. Breitschwerdt points to the GLK, a compact sport utility vehicle new this year that already represents about 20 per cent of the company's vehicle sales. A redesigned E-class sedan will arrive later this year.
In addition to discussing the auto business, he says he also points out to Canadians how relatively well off they are compared with residents of other countries battling a recession.
"Canada is a solid rock," he adds. "You have to look into all these fantastic windfall profits which might happen south of the border. As it turns out now, a lot of it was fluff. Canadians stayed humble, stayed conservative and didn't make mistakes which have been made in other countries and other economies. That pays off now significantly."
That means Canada will bounce back more quickly from the recession, he says.
GREG KEENAN
From Saturday's Globe and Mail
April 11, 2009 at 8:45 AM EDT
AUTO INDUSTRY REPORTER
Marcus Breitschwerdt has a reason to brag and if he did, the numbers would back him up.
Instead, the president of Mercedes-Benz Canada Inc. describes himself as confident about the company's prospects after its best ever first quarter in Canada - and impressed by how policy makers have positioned the country to weather the global economic crisis.
Buoyed by that strong first quarter - the auto maker's sales jumped 20 per cent, compared with a 22-per-cent decline for the overall market - Mr. Breitschwerdt predicts company's sales will rise this year from 2008 levels, even though the overall Canadian market is expected to have its worst year of the decade.
"These are not good times, but we didn't have good times in Canada in the car business over the past five years," he notes. In that period, Canada has grown to become the 11th largest market for Mercedes-Benz worldwide, up from 17th.
Mercedes-Benz is not alone in bucking the trend. Audi Canada sales, for example, rose 3 per cent, while BMW Canada Inc. and the Lexus division of Toyota Canada Inc. both gained market share with sales that fell only 1 per cent and 7 per cent, respectively.
And in perhaps the ultimate burst of optimism, or a signal that the battered auto market has reached the bottom, Aston Martin will open a $1.2-million dealership in Calgary next week. Luxury brands have tended to outperform those of mass-market companies in past auto slumps.
"What you see in the Canadian market, especially in times in which you have feelings of insecurity or uncertainty, people far more intensively than before check and consider their investment and their spending," Mr. Breitschwerdt says. "That plays a lot into our direction."
In addition, a much higher percentage of luxury buyers lease their vehicles than finance them, which means the dealerships have more customers returning at regular intervals, notes Richard Cooper, vice-president of Canadian operations for consulting firm J.D. Power and Associates.
"I was in a Lexus showroom over the weekend and it was like a zoo," Mr. Cooper says. "I think that's probably driving the market now, too. I think there's a lot of vehicles coming off lease at the moment."
Leasing represented about 46 per cent of the market for luxury sellers during the first quarter of 2009, compared with 16 per cent for mass-market companies, J.D. Power figures show.
In the case of Mercedes, the more than $100-million the company and its dealers have spent this decade rebuilding stores has also helped.
Mr. Cooper says Mercedes-Benz and Subaru Canada Inc. are two companies that have trimmed prices on key new models, which also helps explain why both are bucking the downward trend.
"Mercedes has been very aggressive ... on lease and finance rates over the last year or so," he notes.
A continuing infusion of new vehicles better than the ones they replace, or that help auto makers compete in new segments, is critical.
Mr. Breitschwerdt points to the GLK, a compact sport utility vehicle new this year that already represents about 20 per cent of the company's vehicle sales. A redesigned E-class sedan will arrive later this year.
In addition to discussing the auto business, he says he also points out to Canadians how relatively well off they are compared with residents of other countries battling a recession.
"Canada is a solid rock," he adds. "You have to look into all these fantastic windfall profits which might happen south of the border. As it turns out now, a lot of it was fluff. Canadians stayed humble, stayed conservative and didn't make mistakes which have been made in other countries and other economies. That pays off now significantly."
That means Canada will bounce back more quickly from the recession, he says.